Money Functions and Role Quiz - ICSE Class 12 Economics

Free practice quiz: Money Functions and Role (ICSE Class 12 Economics). 37 multiple-choice questions with answers and explanations. Play online, no sign-up needed.

Sample questions

1. Which of the following functions of money is primarily demonstrated when money is used to record the value of goods and services?

   1. Medium of Exchange
   2. Unit of Account
   3. Store of Value
   4. Standard of Deferred Payment
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   Answer: B. Unit of Account

   The 'Unit of Account' function of money allows for the measurement and comparison of the value of different goods and services. When money is used to record the value, it acts as a common yardstick, making it a unit of account.

2. The characteristic that prevents any single individual or entity from creating large quantities of money at will, thereby maintaining its value, is known as:

   1. Uniformity
   2. Divisibility
   3. Limited Supply
   4. Recognizability
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   Answer: C. Limited Supply

   A limited supply is crucial for money to retain its value. If money could be created infinitely, its purchasing power would plummet, rendering it useless as a store of value and medium of exchange.

3. The fact that modern paper currency is easily broken down into smaller units (e.g., cents) exemplifies which desirable characteristic of money?

   1. Portability
   2. Divisibility
   3. Durability
   4. Limited Supply
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   Answer: B. Divisibility

   Divisibility means that money can be divided into smaller units without losing its value. This is essential for making transactions of varying amounts, from small purchases to large ones.

4. If a currency is easily counterfeited, it directly weakens its function as a:

   1. Unit of Account
   2. Store of Value
   3. Medium of Exchange
   4. Standard of Deferred Payment
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   Answer: C. Medium of Exchange

   The ease of counterfeiting erodes public trust and the 'General Acceptability' of the currency. If people cannot be sure they are receiving genuine money, they will be reluctant to accept it for transactions, thus undermining its role as a 'Medium of Exchange.'

5. The ability to divide money into smaller denominations for everyday purchases, such as buying a candy bar with a $1 coin, demonstrates which characteristic?

   1. Portability
   2. Durability
   3. Divisibility
   4. Recognizability
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   Answer: C. Divisibility

   Divisibility allows money to be broken down into smaller units to facilitate transactions of various sizes.

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